Some questions for the long term forecasters

I find it difficult to believe some in the media are taking these latest economic forecasts for 15 years outside the EU seriously. They have all the hallmarks of the approach that the Treasury used to get the short term forecast for the aftermath of a Brexit vote so hopelessly wrong.

The first thing to stress is the forecasts which state the UK as a whole will lose 2% of GDP if we stay in the single market, 5% if we leave with a trade deal, and 8% if we leave without a trade deal are not saying we will be 2%-8% worse off in 15 years time. This is an estimate of slower growth, not an absolute decline. If we carry on growing on average at 2% per annum over the 15 years we will be 34.6% better off at the end of the period. These forecasts suggest that might only be 32.6% or on a worst case 26.6% better off. The 2% figure over fifteen years is little more than 0.1% per annum, or a rounding error.

The second thing to stress is that to forecast this accurately over 15 years they have to forecast two unknowns – how well would we do if we stayed in the EU, and how well will we do as we are leaving? Why do they assume that staying in is a risk free positive option? What assumptions should they make about tax levels and costs of regulation in the future? Will there be new taxes that hit UK economic activity? Will there be something like the ERM again that triggers a major recession? How much longer will the EU continue austerity policies?

The third thing to point out is there are many more issues which will have a far bigger impact on growth than Brexit. How have they modelled the risks of a Corbyn style government? I do not expect one but over a fifteen year period independent forecasters need to ascribe probabilities to policy changes that are being discussed. What do they assume about the adoption of new technology? What will Artificial Intelligence do to UK professional business services? Will the US still be pursuing pro growth low tax policies in fifteen years time? Will the rolling Euro crisis of 2009-14 reappear and what could that do to growth?

The fourth question to ask is why should there be any loss were we stay in the single market, compared to staying in the single market as an EU member? If, as they seem to think, the single market is the good bit of the EU, surely staying in it means no loss?

The fifth question is why have they not included a good positive gain for the UK from spending our own money at home instead of taking the strain of £12 bn going out across our balance of payments every year to be spent elsewhere? How have they modelled future increased outgoing to the EU if we stayed in?

I could go on, but feel I have asked enough to show why I think these forecasts are a nonsense. Most 15 year forecasts are likely to be wildly wrong. The longer the period of the forecast the more other things can happen that may have a big impact. In fifteen years time we might have a more integrated United States of Europe from the Eurozone, or the zone might have broken up altogether. That will be determined by voters in a range of countries, and by events and markets.

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141 Comments

You’re falling into their trap, by making too much of the economics. The only safe forecast 15 years hence is this, and is the reason why voting Leave was a no-brainer:

If the EU disintegrates, the UK will be better off to have left now than had we stayed in that 15 years and sunk with the ship.

If the EU doesn’t disintegrate, it will tend towards a political union, with its own army, integrating poor Balkan states and Turkey alike into the fold, ever more regulation, ever more socialist mantra, then we will be better off working with the US and other non-EU countries from outside to curb this growing monster.

Other forecasts including those for economic growth are just noise on the spectrum, and are largely irrelevant to reasons for staying or leaving.

but that’s not what people were led to believe at the time. It was more of the misinformation and scare mongering to manipulate the public, just like when they tried to bump us into the €uro and then again before the referendum when they tried to use project fear to get the result they wanted.

Sadly, there are a lot of people in the UK who are susceptible to these manipulation techniques.

Listening to Any Questions/ Any Answers yesterday you can see it first hand, the Any Answers presenter misquoted Churchill saying that he wanted us to be part of a “united states of Europe”. Educate, inform and entertain eh? yeah right.

Sadly JR, your blog gives credence to the’forecasters’. Why are you not targeting Hammond for either acting against collective responsibility and govt policy or his dept being out of control reducing its credibility around the world? Is this not the focal point of your concerns and we’re such forecasts come from? You should be orchestrating the remaoval of Hammond ASAP.

What is Party doing aboutthe ….. woman Soubry? Her personal remarks about JRM are disgusting, both against his religion and domestic life. When is her association going to give her the order the boot?

It will be hard for Conservative voters in her Constituency to vote for someone who attacks her own Party rightly or wrongly. Her attitude encourages tactical voting to get rid of her by Liberals,UKIP and Greens . They will vote Labour.
Then realign their voting for a probable following general election as Post -Brexit sets in. She could join the LibDems. They are not sure where they are at either most days. They have good days and bad days, depending on mood swings and weather, fluctuating personal energy levels.

Spot on, Peter. Several times already, May’s “EU Baby” has burst out from behind it’s screen of BS, usually when she meets some crisis point (i.e. we start to make proper Brexit progress, or she fears we might).
Prior to her holiday, she was marching along well with true Brexit intent. Then she went on holiday, and came back with that glazed look that suggests she was coerced / threatened / talked at… either way, she has been hell on legs ever since.
Who was responsible for this reverse ‘Saul on the Road to Damascus’ conversion? The answer to that would go a long way to explaining her behaviours ever since.
It’s very simple: either we get to see proper evidence that she is marching us out of the door, or she needs to be replaced, urgently, by someone who will. Just because we Leavers are civilised, and we are not yet marching the streets threatening to chop off remainer heads, doesn’t mean she will get away with this backsliding nonsense.

Indeed, but what matters to people is Gdp per cap anyway so lots of this growth is more low paid people which actually lowers Gdp per cap.

What is likely to affect growth far more is will Corbyn and O’Donnell get in and start their insane economic vandalism as they outlined yesterday
Will T May and P Hammond be replaces with some real Conservatives who have a sensible pro growth agenda rather than the current hight tax, big state knows best one.

As i said before one event (such as Gove stabbing Boris and lumbering us with socialist dope May) can change everything hugely. How can one predict That?My view is that if we are fully in control again we are very likely to do better than if we are a mere region of the evil EU.

Absolutely spot on sir. These forecasts are pure pro-EU propaganda designed to warp peoples perceptions. They are presented as facts. They are not facts.

These forecasts are lies, they are politically motivated, they are intended to deceive and they are intended to incite

Moreover they are targeted at the ‘younger voter’. The fact that the forecasts stretch 15 years into the future is significant. The figures are deliberately downbeat to incite fear in a particular section of British people. If you’re over 55 and enjoying a degree of security what happens in 15 years time is hardly a major concern. Of course if you’re 20-40 years old it matters considerably. At this age you have less security and no doubt feeling a tad economically vulnerable. You would be influenced by these lies being pumped out by pro-EU entities and I include this PM and her allies across all parts of the State

It is my belief that the EU will implode in 15-20 years time. Why? Because its constituent parts are inherently weak. Take away Germany from this political-economic construct and it all comes crashing down

We need to be protected from such a possibility. The UK if managed correctly could become another Taiwan and it is this that terrifies the EU autocrats

We need nothing more than a pro-UK leader, a confident vision and the desire to embrace our independence in the same way hundreds of other nations do around the world

I doubt the Yanks, Kiwis, Aussies, Cubans, Chinese etc etc would vote to share their nation’s sovereignty and independence with a foreign political entity

Seems like they had to go out to 15 years to get a noticeable figure. If they said it would be say 0.5 percent over the next 3 years it would not have the impact they hope to get from those who do not understand much about figures etc. and whom they hope to panic.

We are talking about the weather in 82 years time right now and foolishly investing billions on the outpourings of soothsayers and post modern “scientists”.
Don’t underestimate the stupidity of Westminster.

I agree, these forecasts are clearly for propaganda purposes only. So the more interesting question is, by whom were they released and with what objective?
Putting a positive spin on it I suggest they were produced by the Treasury to show that if we were to carry on as we do now after leaving the EU, we would be damaged financially, but not much. Therefore we must make changes to our economic management post-Brexit but not drastic ones.
That assumes however that there are not big gains to be made by making radical changes either as promoted by Corbyn or in a saner direction as promoted on this site.

For goodness sake, these people should get a job in a fair ground. We might have another world war by then so how accurate would their forecast be then? Its just all scare mongering but I’m afraid Mrs May probably takes it all as gospel. The future in the EU looks dismal to me and staying in would mean being downtrodden for years to come. Get out now.

Not the cabinet where it matters. You knew her appalling record and her weird views of the world before you voted You should not be ashamed of the result to date. You let yourself down, theparty, voters and country.

Tell me when you will apologize or admit nothing came from Cameron’s Bloomberg speech? How much of the Lancaster speech has May already reneged on? Why has Davis hidden and disguised £100 billion the U.K. Has agreed to pay the EU for talks? It is likely to be more because there are add one. Who in their right mind would give away £100 billion to talk about trade? What message does this send to other countries? What are you going to do about holding Davis or May to account for this vast sum of taxpayers money when the public services are in a chronic mess.

I watched Soubry on Andrew Neill’s programme This Week (she was standing in for Michael Portillo) where there was a discussion with an expert from the Institute of Economic Affairs on “Is the NHS broken?”. She was totally out of her depth and the best she could do was to say that her own NHS doctor’s practice was excellent. Alan Johnson, a regular, was unusually angrily vocal and rejected any criticism of the NHS, missing the detailed points made by the expert (and Neill) on the poor outcomes for major illness compared to both Europe and the world. The expert was an American, who had nothing good to say about American healthcare.

What was depressing was the attitude and/or lack of knowledge by two politicians. When Neill introduced them at the start of the programme he made his usual jocular remark about two failed politicians, or words to that effect, and Soubry looked surprised and did not laugh.

There are many people presented as “experts” on TV newspaper reviews with odd but important sounding names of “institutions” to which they belong..but no-one has heard of the organisations, who or what funds them, their day-to-day purposes and actual work and why the person is called expert or indeed the organisation.

Yes both Soubry and Johnston’s ignorance of other Health Systems in Europe, the way they worked, and the results they gained, compared to their blinkered unconditional support of our own NHS were staggering.

Why is it that when ever anyone talks about the NHS they simply compare it to the American system, both are complete failures, in very different ways at the extreme and opposite ends of the scale.

Both were frighteningly ignorant and blind of any real facts/problems within the NHS or the benefits of any alternative system, and still wanted things to remain as is.

I wonder if this totally blinkered view causes them to be Remainers on the EU as well, with a closed mind in not even wishing to look at alternatives.

Why is a high level of health expenditure regarded as better than a low one? The most healthy nation would need least expenditure: possibly Zero if in perfect health. Prevention of hazardous health outcomes is far more efficient than increasing ability to afford their expensive remedies.

‘Promoting Better Health’ was once a Govt objective, which could have reaped rewards if it were managed properly. Further, Govt used to allow a tax advantage to those who paid private health insurance. Such methods can save much more than their cost.

Jacob Rees-Mogg is an example of everything that is wrong with our society.

He is where he is because he was born in to a wealthy, entitled family.

He inherited it all. The school, the university, the contacts.

If mama and papa had have been poor alcoholics he would be a nobody.

Reply No-one is to blame for their parents! Most of us judge people on who they are, what they do and what they strand for, not on who their parents were. Why do you have to be so nasty about someone who is helping our public debate? I do not go in for personal abuse about Mr Corbyn

Andy, grow up. I dont’ care what a persons background is as long as their intentions are good. In my book he would be a welcome change. He speaks his mind and is clear in his stance over Brexit. Not all of the cabinet come from privileged backgrounds. Surely we would all like to provide for our children and with encouragement from caring parents they can go a long way in society today.

I think it shows JRM’s motivation is simply public service rather than using politics as a money grabbing career like the lefties you support.
He could stay at home and just have a quiet life.
It is to his credit he has chosen to do what he does for us.

So what you are saying is that Jacob Rees-Mogg has received the very best upbringing, mental, physical, moral, social, economic education that the State Sector nor few others, even the terrible and filthy rich could possibly have?
So, he’ll do quite nicely for PM. We can sort out the inequities of his rise to power later and make absolutely certain no-one else is ever made fit to be the Leader of the whole country.

Isn’t it amazing that Dave and Oz got to Downing St by making Eurosceptic speeches and promising reforms, but were Andy Tories all the time. There are plenty left in parliament and willing to rat on the promise made in the referendum and there is no way to get them out. It is reported in the Sunday Telegraph that central office was planning to take away selection of candidates from the constituency associations. Perhaps there are a lot of Andy Tories in that place too.

I’m afraid Andy is a bitter, blinkered and narrow-minded remainder. If he is upset at our wishing to escape from the EU’s clutches, then perhaps he should put together a cogent argument as to why, exactly, it would be in our country’s interests to remain. That would be more acceptable than insulting someone whose sentiments he disagrees with. I daresay it’s easier for him to go off at some personally driven tangent than to attempt to convince us of the greatness of his much admired EU.

If the papers are to be believed Barnier is pursuing his own agenda without consulting the 27.
It appears many of them are getting twitchy in case we walk away.
There is no way we accept Vassal statehood unless you want riots in the streets. Less of the grandiose speeches and more progress towards the exit please.

Sorry but 15 year forecasts are an absolute nonsense and a complete waste of time.

Who would have thought just 5 years ago we would now have an electric car flying around in our solar system, with a dummy driver in the driving seat, which was all funded by an individual.

I wonder how many of those who made these forecasts will still be alive in 15 years time to see the results, given the percentage of people who are likely to fall ill, have accidents, or even be the victims of crime or terrorism.

If these forecasts had any merit why did they not predict the crash in 2008, even the Queen asked why! Treasury and BoE trying to target fear in e young to help thwart Brexit. The young will look up to hear mortgages going up because of interest rate hikes. Again, why has Hammond and Carney not been sacked?

Once again we are talking about the EU in terms of trade and not governance.

Being an independent sovereign nation, able to sit at the top international tables and act in our own national interest overrides such economic considerations.

How many people would have predicted the fall of the Berlin Wall and the collapse of Communism ? The financial crash ? A devastating Tsunamis and atomic power stations explosions in Japan ? One could go on. All these things have had an economic impact. None could have been predicted.

What we should be focusing on is how we wish to be governed. What will our foreign policy be ? What will be our industrial strategy ? What laws are going to make, repeal or amend ? All these things we can do for ourselves and in our own national interest and all will have an impact. Staying in the EU, the SM and CU, or even following / shadowing them will be a disaster ! We will not be a true independent sovereign nation, something the EU (not necessarily the rEU27) fears most.

Having a success country outside the EU will show others that the EU is not a good idea. They too will want either special treatment or, want reforms that take back powers from the EU. Losing the UK is bad enough, seeing the whole project begin to unravel is their worst nightmare, hence why they seek to avoid us leaving or doing well.

And the tragedy of all this is, our very own government is seeking to help them (EU) rather than those that have elected them. Disgusting !

There is another aspect to consider when evaluating such forecasts – what is the net present value of the difference forecasts. In normal.times (that is QE free, a discount rate of about 9% was used. At this rate, after ten years, the difference did not amount to much. After fifteen years it mattered even less.

“The 2% figure over fifteen years is little more than 0.1% per annum, or a rounding error.”

Even the worst case scenario of 8% over 15 years is only 0.5% per year and is insignificant compared to the 4% reduction in one year we suffered after the financial crisis of 2007/8 and still survived….

These forecasts are actually good news for Brexit supporters and show just how little economic impact there will be in return for the far bigger prize of self-determination where we are back in control of our immigration, taxation, money, foreign policy, laws and assets (fishing grounds) etc..

They have no more credibility than Mystic Meg. They are a politically motivated treasury tail trying to wag the democratic dog. Were they true to the civil service code of well thought out impartial advice there would have been a positive scenario projection and none of it would have been in the public domain. For instance:-

What if UK future world trade agreements give us a marked reduction in the cost of imported food. What if the EU falls apart politically through the democratic deficit. What happens to the Euro if the EU continues to print money to prop up EU banks and out of control economies. What if the EU loses out in the general UK market place to more competitive sources.

To a large degree it is place your bets time, but outside the EU the UK is free to fix it’s own odds. We have more control of our destiny.

Forecasting and predicting future events is notoriously difficult. That even the private sector who have at least evidence based past trends and detailed knowledge of the narrowly focused subject they are forecasting know that it will only be a guide. That it be used to track performance on which they know will cause them to frequently amend their actions as the inaccuracy expose themselves. In the wider much more complex world there are so many possible possible outcomes dependent on computations of which factors will come into play and also so many unknowns forecasting to my knowledge is no better than being blindfolded when picking out an answer with a pin.

For forecasters there is of course the problem of which assumptions to choose on which to base their predictions. If the wish is to ensure a forecast that backs their claims that they are using to advance their case be it a cause, ideology or other vested interest then they will pick only assumptions that will fit that bill. Why not everybody does; the Treasury and other remainers, climate alarmists, health experts and the like. The list is long and is telling that it includes only those whose arguments are weak or like remainers, socialists and other faith based zealots non existent or at least unprovable.

The staying in the single market option assumes that we leave the customs union and therefore cross border trade has a higher cost. 0.1% of GDP per annum spent on customs forms doesn’t seem unreasonable though I have no idea what the actual cost would be.

The part that I would like to understand better is the extent to which the analysis, and others like it, are able to capture how the UK economy will adapt from its current position of being optimised for membership of the EU to being optimised for being outside the EU.

Presumably, the economy will change to reflect this change in context, but it is difficult to see how any model could duly capture this, as it implies that the model knows what optimised looks like, whereas it is an assumption of free market economics that only the market can discover the optimal arrangement. Perhaps the model spirits this problem away somehow. But I haven’t understood how.

It looks at the historical relationship between Countries, population size and transactions costs (which encompasses freight and other costs including trade barriers so of which relate to cultural differences).

The trade that takes place is deduced from the equation.

Another historical relationship between trade and GDP spits out how incomer is affected.

Intuitively it makes sense. However, in practice there are many factors which can invalidate the results produced.

For instance, can one assume that re-introduction of trade barriers to some extent will have an identical effect as the opposite movement.

Also, the trading environment has changed beyond recognition with a massive fall in freight rates both sea and air, lower tariffs worldwide and increasing importance of services and enormous technical change.

Distance is certainly far less important in trade than it has been in the past.

Also, the use of the Gravity model would never have predicted the rise of Japan industry when transport costs were much more significant.

The truth seems to be that the Gravity may have its uses but should carry a health warning

Forecasts months ahead are often wrong. Looking 15 years ahead is impossible with any degree of reliability. Besides which, I have lost all confidence in forecasts since the “project fear” debacle. At the time I thought Michael Gove’s ” we’ve had enough of experts” statement to be rather suspect. Since then I’ve come to share his sentiment. Between the project fear extreme bias and the inherent uncertainty I no longer believe these forecasts have any validity.

The Remainiacs forecasts prior to the vote and again following the referendum, were shown to be absolute nonsense.
How anyone can believe predictions for 15 years hence, is beyond me.
No surprise the BBC (the EU’s mouthpiece) swallowed the whole lot, hook, line and sinker.

“…I have asked enough to show why I think these forecasts are a nonsense.” – certainly so, so why did our dopey Chancellor not do the same and stop this inadequate work being inflicted upon us? The action of a knave to make a trap for fools it surely cannot have been.

Just imagine a healthy person going to his/her doctor for a regular check up and being told ” you have now a shorter time to live compared to when I saw you last time ” ; such news would evoke some concern . If the doctor said ” You are in splendid health for your age ” it would convey an entirely different spirit . I liken this to the way forecasters see the economy in all its guises .

We are in good shape . Every year the education system produces hordes of very capable young people for industry and commerce . Our existing skills and capability are some of the best in the world . We have a record that can be trusted . Our communications are second to none . Ambitions can take us everywhere .

Forecasters ought to look on the brighter side of things and see the value in encouragement ; they don’t have to emphasise doom and gloom . Hammond has to create a positive view of Brexit and start by incentivising the economy . We will all benefit from this approach .

It’s unbelievable our sophisticated chattering classes are prepared to believe this nonsense. They probably scoff at the idea of emperors in Ancient Rome consulting the seers of animal emtrails but a few decimal points in an economic forecast are enough for the gullible to swallow anything. Did you see them all tut tutting like elderly school ma’ams about the prediction that the regions who voted more heavily in favour of leaving the EU will be suffer most? What a surprise! Who’d have thought it! Talk about a lapse into self parody.

Reply 35 is a silly figure unrelated to reality. A majority of Conservative MPs is Eurosceptic, and the ERG group is considerably larger than 35. There is no Group whip of course, and numbers who attend events fluctuates.

Peter, the red lines were crossed – in fact, crossed out – in December, when Mrs May signed up to full regulatory alignment with the EU, as the only way to keep the Irish border open. The ERG seems not to have noticed this

Actually, scratch my earlier comment. The media and the North London liberals know all too well these forecasts are nonsense. They know all to well it’s an attempt to scare people and they cynically play along because they are doing very well thank you out of the status quo. They will stoop to anything to ensure little Tarquin can study in Europe with minimal hassle and who cares if a few scruffy northerners are permanently unemployed as a result.

I used to be a Thatcherite but that period seems to have produced a generation who are obsessed with money to the detriment of everything else. Members of this generation are now in positions of power and influence and think of little else but money grubbing. Whether they are in the right or the left, every human activity is measured against a ledger. Plenty of good things came out the Thatcher government but we on the right have to accept there have been some pretty fundamental baleful consequences.

Good summary. The distinguished economist Roger Bootle put it thus: Imagine an economic forecast for the U.K. made in 1979,projecting forward to 1994, which took no account of possible policies of the Thatcher Govt. How useful would that have been?

This report has clearly been leaked with the intention of embarrassing the govt and affecting political debate – surely gross professional misconduct by those who leaked it. Anyway now it’s out, let’s see the whole thing so we can see the assumptions. What it will doubtless show, as anyone who has ever modelled a business or project knows, is: rubbish in, rubbish out.

These forecasts are so obviously rubbish that they barely deserve discussion. What really should be of concern is the cost of capitulation and fudge that has and is still going on. Will somebody please do a study on it, but then, the MSM will no doubt rubbish the idea that the bad deal we are apparently headed for will cost us vast amounts of money as well as our sovereignty.

Ambrose Pritchard-Evans in the Telegraph had it absolutely right, and we are in very serious danger of being destroyed as a country.

Rather than whinging about other people’s forecasts it would be for you to actually produce some of your own – published along with your methodology – and for it to be peer reviewed.
This is how society comes to the best informed decisions.

But, I’m afraid, Brexiteers have become such swivel-eyed zealots that anything which does not show golden water flowing from the taps and purple unicorn treating the infirm is immediately rejected as having been produced by ‘Remoaners’. You don’t like the message so you attack the messenger – as we saw in Steve Baker’s shocking verbal assault on the civil service.

Most of the people who post on this site are clearly pensioners. 60s, 70s, 80s. As are most of the Brexiteers in Parliament. In the unlikely event that Brexit goes right you have little to gain. In the more probably scenario that it goes wrong you have little to lose.

My children are 5 and 9. They – and their generation – will be the real victims of your nationalistic folly.

Oh, and you should not be too confident about there being no Corbyn government. Obviously a sensible Labour leader would be 25 points ahead of the car crash Tories in the polls. But even Mr Corbyn will beat the worst government this country has had for generations. The Tories are like the walking dead. By massively alienating under 50s through their desire to appease bigoted pensioners they’ve guaranteed their own future electoral irrelevance – and, best of all, they’ve not figured it out yet.

Where London goes the rest of the country eventually follows. And May’s elections for the Tories in London all be brutal.

Reply I was pressed before the vote to give 15 year economic forecasts, and I replied that it was an impossible task as so many things are likely to change over such a long period. We now know the anti Brexit side is also unable to produce reliable short term forecasts, where I did produce ones that were more accurate.

I am in my 80s and voted for Brexit. I did so for the sake of my grandchildren. I have discussed the reasons for this with them (the older ones in their teens). The forecast that matters is not the notional financial benefit that may or may not accrue in fifteen years time (which is worthless in todays money – see my earlier post on net present values) but the benefit of being able to vote out a government of which they did not approve.

The fundamental issue in Brexit is who is to be in control – politicians you elect or dismiss from office, or unelected bureaucrats in Brussels – not an uncertain financial forecast. Brexit will undoubtedly have an effect as businesses adapt to new circumstances. For some it will be negative, for others it will be a spur to look for new opportunities. It is a small price for freedom.

“But, I’m afraid, Brexiteers have become such swivel-eyed zealots that anything which does not show golden water flowing from the taps and purple unicorn treating the infirm is immediately rejected as having been produced by ‘Remoaners’. ”

Andy, you are in danger of becoming this site’s answer to Dave Spart. Not all posters here are misguided and selfish pensioners ‘SKIing’ – Spending Kids Inheritance.

Yes, I fit your category of being retired, and I also wear glasses, I also have Children and Grandchildren.
Do you honestly believe I and many others like me, would not have our offspring’s best interests at heart for their future.

Sometimes age brings wisdom, and insults such as yours are like water off a ducks back, we have seen it all, heard it all, and lived through this type of nonsense before.

If you are confident of your arguments, then simply outline the facts and use creditable information to back them up, then you may get a little more traction and interaction, rather than just insulting people with your broad and rather crass statements.

‘May’s elections for the Tories in London all be brutal’. Yes and those of us with Labour Councils soon learn the terribly high cost of that, especially if you’re not in social housing with rates capped within your rent.

Andy is right. There is quite enough agreement here. No doubt many of us are in our later years. He is an enthusiastic and courageous advocatus diaboli. His political judgement is jejune but his spirit is admirable. I enjoy his vigorous comments and suspect – hope anyway – our host may enjoy them too.

He makes many angry forecasts but should reflect that none of us can know the future, not me, nor him, nor of course the forecasters whose fatuities JR skewers today with such deadly elegance. What can make a difference, though, is attitude. Courage and energy will produce a good result but defeatism is the sure recipe for failure.

To make forecasts about such a significant event requires something which I am afraid is not even possible.

Imagine making a forecast say 20 years ahead .

Mark Zuckerberg was only 20 when facebook was launched.

It is conceivable that people who will significantly affect the future economic course of the country may be still in their infancy or not even yet born.

It was ridiculous to even imagine that a meaningful forecast is possible. These futile attempts do no more than project into the future past trends i.e ceteris paribus and if nothing does change …………..

We are all doomed!

However, I agree entirely with the view that the actual outcome will depend on how the country responds to the opportunity. But this is something that cannot be modelled.

Really business people such as many of us on this forum dont waste our time conducting fantasy analysis and forecasting. No forecast done by anyone has ever come true ever. In global and international markets there are too many variables to be even remotely accurate.

People in their 60’s and 70’s still have

a) Another 30 years to live
b) children
c) grandchildren
e) Far more experience and wisdom than you

Remainers also consist of a lot of 60 and 70 year olds, your obsession with thinking you know only older people voted leave and younger people ( who could be bothered to get up) voted remain is nonsense

When your children are old enough to vote they can elect what ever form of government they like, thats how democracy works. Or do you want to give 5 year olds the vote?

By the way Citigroup has just announced they are establishing a global innovation and technology centre in London……. Remind us of your predictions again

We exit the EU a the end of March 2019. Surely it is time then to end the fantasy of Labour Party Socialism? “The rich get richer and the poor get poorer” Yawn! I think we have all, or most of us, have grown up enough to know Socialism is not the answer to inequality. If not, there are enough Eastern bloc dissident novels published to make sure no academic is given a pass mark to teach or lecture in a college or university. They advocate a very nasty ideology called Socialism which has caused the murder tens of millions and starved to death even more. Opposition parties by all means. But let’s make sure our children don’t fall for lethal fairy tales of Marx and Corbyn.

Of course. I said this before in my comments. The point, however is not that 15 year forecasts (and that includes those by Minford et al, whose scribblings seem to be embraced by many brexiteers) are fraught with problems, but that it is irresponsible to make a decision for major policy change WITHOUT any modeling. That modeling should always be interpreted by experts both as to assumptions, model structure, forecasting period (15 years is extremely long even base variable (EU economic forecast) as well as the always relatively small differential (EU minus UK). An error of 1% per annum in either will dwarf the differential.

What is of course far more useful, and sorely lacking is modeling of the much shorter period of say the remainder of this election cycle (or of the current EU budget cycle) plus two or three years. That would show up ver large differences for each variant chosen (for instance: (a) out with no transition, Hong Kong/Minford model (b) out with no transition, WTO basic (c) and (d) as (a) and (b) but with a transition period as per EU rules, of say 2 years, (e) through (h) various variants with increasingly closer similarity with status quo/no exit and all with a trasition period as in (c) and (d).

Unfortunately such modeling is not public but I am aware of rough modeling done by at least one EU country for the effects of several Brexits on its economy.

Finally you mention that there should also be effects of policy responses to brexit effects. I am sure that can be done but then we would have a cascade of “error” generators: first model choice, then assumption choice, then brexit type choice, then policy choice. Not impossible to do but probably not very useful for informed debate.

The simplest way to look at this is a statical approach (maybe with some exchange rate variation) by sector and by brexit variant, for say, the first 3 years from now. I am sure that all of these would show gains for the UK treasury (EU contribution savings, not taking into account fiscal effects of GDP variation) Uk investment requirements (borders, customs etc) and impact on trade exposed sectors of the economy. Even that would have to be quite complicated if one wants to avoid the trivial.

You do not miss the point of JR’s article. You do miss the point of why so people voted Leave and have not changed their minds.

The purely economic arguments are as nothing. It is like discussing seriously the cost of a man’s sword as he goes into battle for his very life. Moaning “But this could cost you an arm and a leg!” is not as immediately important as you may think and wish.

No I do not believe I missed Mr Redwood’s point. I think these long term projections are very difficult to make and should not be used like some sort of betting forecast. I hope you agree that there are simply too many choices a modeler should make so there can never be a single plausible outcome. However, I cannot see what the UK will gain by laving the EU. But that is different from predicting a precise impact.

And of course if someone’s private opinion is that the non-economic aspects are worth an economic cost (and that is not what Brexit UIltra’s tend to say) there is nothing against that as long as that is the opinion of a strong majority (I do not mean the referendum but the subset of leavers who are prepared to pay for (not gain from) enhanced sovereignty). And I do not think 17 million UK citizens want to pay a price. Maybe 2-3 million. Becasue you would not be the only one paying that price, your neighbour who may not be so patriotic may disagree.

Rien Huizer
Figuratively, some people try to reinvent the wheel. They come up with “new” ideas. But do we really have to reinvent the concept of democracy for you and others???? Do we continually have to explain what it means , the procedure of a ballot? The people who voted Remain have accepted the result. One or two have not. They appear not to understand and just moan and moan and moan

The problem with these forecasts is that they predict a future that never happens for one simple reason ( apart from the fact: You cannot predict the future 🙂 )

They do not and cannot take into account any actions that the government of the day will take to mitigate any negative effects.

For example, if I am driving from A–>B at 60mph and notice a large hole in the road 2 miles away I can predict that in 2 minutes I’ll fall into the hole.
However, I’d also, slow down to 30mph, and drive around the hole and continue merrily on my way.

Likewise, if we predict GDP slow-down due to some event the government can do lots of things to mitigate or lessen it impacts.

Cut business taxes, reduce regulation, increase R&D tax breaks, support exporters, support importers, apply tariffs, remove tariffs and so on and so forth.

These predictions are always based on “Linear thinking” – looking at a trend and then simply extrapolating it forward.

Very wise. In this connection the Bank of England Governor Mr Carney has indicated our future doom.This is an admission he is incapable of averting disaster. Why have a scarecrow a robin builds its nest in?

Prigger.. Carney was appointed to a position of trust..he has to tell the truth as he and the BoE see it..question is why is our JR not appointed since he seems to be an authority on everything..well according to you anyway..or maybe you know enough to interview for the job yourself.

I’ve been arguing the EU has helped to create prosperity and peace across Europe. To argue that NATO has prevented the Nazis and Communists etc of this world from rising up is clearly wrong.

However, what Brexiters could argue and i would be open to is that the days of Nazis and Communists are over. The EEC / EU might have helped create prosperity but the EU is no longer necessary for that. I’m open to that possibility.

That the real war now isn’t against potential dictators and revolutionaries but against the break down of society – children without a Mum and a Dad, drugs, lack of with ethic, crime, things like this which we didn’t see in our world 100 years ago even though it was rife with revolution and war.

So my views might be out dated? I don’t know. What i certainly know is that there are certainly other battles our country has to face—inside our ‘society.’ Just as serious, perhaps, as war, revolutionaries and bombs.

Or maybe it’s a mixture of the two – we still have many serious old world problems to face but many new ones as well?

So I’m now beginning to think that Hard Brexit COULD (or might not) be the best option for our country and Europe.

However, i’m still convinced that IF Hard Brexit is the best option, then we first need to build up our economy, get a strong leader in place with a good strategy etc … If not, our economy could flounder, and we end up back in he EU but under worse conditions, and facing all kinds of problems to get our feet back on the ground. Also, if we were responsible for the sudden break-down of the EU, chaos could ensue in Europe, and who knows what could happen?

You may want to take a look at the border between Russia and several countries that used to be part of the Soviet Union. Not really a peaceful place to be. The problem with Europe in the past 150 years was nationalism, dressed up as fascism or communism. The supranational institutions that we have today make the past rather silly. Why on earth should Germans fight Belgians, is what people ask themselves now instead of “How should we go about it”. Geldings.

And to call the many neutral-minded, financial people across the world, ‘idiots’, including the United States who think the single market is good for the UK just makes your comment look even worse. I don’t want to have any part of Brexi if Brexiters talk like this.

I come back to the simple fact that the EU Commission, including Michel Barnier himself when he was the EU Commissioner responsible, and various other sources, including the UK government in some of its official reports, claim that the EU Single Market has added only about 2% to the collective GDP of the EU member states. Moreover in some other reports it is suggested that the benefit to the UK has been only half of that average. And that 1% or 2% is before taking into account the costs created by the excessive regulation of the Single Market, which the EU itself once estimated as around 5.5% of GDP.

However clearly it is possible to set up models which take that fairly solid base of 1% of 2% of UK GDP being at stake if we leave the EU Single Market and amplify it by some factor, putting that down to “dynamic” effects such as reduced inward investment and slower growth in productivity, or increased non-tariff barriers, or whatever. So in the Treasury’s doom laden pre-referendum forecast of April 2016 that speculative amplification factor was about four, and that has been repeated in the recent leaked studies.

But none of this counts for anything, does it, the Remoaners having been allowed to take control of the media narrative and establish it as a proven fact that leaving the EU and its Single Market and its Customs Union will be an economic catastrophic.

David Davis smiles and jokes while constant attempts are made to turn the public against the very purpose for which his department was set up. Whether he has been allowing this to happen because Theresa May has instructed him to let it happen, or on the bad advice of his own civil servants, it is impossible to say with any certainty.

Makes you wonder why we’re even discussing this topic..fifteen years into thd future is a whole generation away and it may be that they will have a whole new way of looking at things then..its hard to believe but the internet and mobile phone only came to full use by people about twenty years ago..before that we lived in the datk ages

It’s Sunday morning, so more tidal waves of the usual ill-informed and deceitful tripe on three TV channels, and here is a selection of just some of the garbage:

1. Anna Soubry incorrectly thinking that Norway and other EFTA countries are in the EU Customs Union, and so if only we took the sensible course of being like Norway that would solve the problems with the Irish border.

2. Chuka Umunna referring to “that referendum in 2016” in much the same way as Nick Clegg once dismissed the Bill of Rights as “some law dating back from 1689”.

3. John McDonnell helpfully explaining to Robert Peston that Turkey is in “the” EU Customs Union (which in fact it is not); if instead it was in “a” customs union (which it is) then it would have greater freedom to make its own trade deals (which it hasn’t).

4. The same John McDonnell calling for “rational debate”.

5. An Irish politician, Neale Richmond, saying that the Irish government had looked at the customs arrangements for Turkey which is in the EU Customs Union (which it isn’t) to see whether that could be a model for Ireland (only if they want massive delays).

6. The same Irish politician saying the Irish government has not yet seen a technological solution to keep the island of Ireland “border free” (which it is not), with “no border” (which it has) while Alistair Campbell merely said he did not want to see a “hard” border, rather than preventing the recreation of a border (which already exists).

7. A Labour politician quoted as saying that keeping the UK or at least Northern Ireland in both the EU Single Market and the EU Customs Union was the “only” guarantee of an “open” border in Ireland (that is to say the border which does not even exist at present according to the Irish politician).

Once again this morning it was mooted that perhaps some parts of the UK economy could stay in the EU Single Market, while the rest would not be in the EU Single Market and so would be free from the burden of ill-designed EU regulations. In particular it was suggested that all UK manufacturing could remain in the EU Single Market.

I think I have a much better idea, which is that UK businesses which export into the EU Single Market could remain subject to the panoply of EU Single Market rules while those which never export to the EU would not be subject to EU laws. After all we do not impose US laws on all UK businesses because some of them export to the US, do we.

Thus to use alternative terminology, that of the moment, the “regulatory alignment” with the EU would not be applied according to any geographical criterion – for example so that Northern Ireland was aligned, but the rest of the UK was not aligned – and nor would it be applied according to any sectoral criterion – manufacturing aligned, but other activities not aligned – but rather according to the destination of the products – exporters to the EU aligned with EU regulations, other businesses not aligned.

That would relieve about 94% of UK businesses, producing about 88% of UK GDP, from any requirement to conform to EU laws, while 6% of UK businesses producing (at most) about 12% of UK GDP would remain subject to all EU Single Market laws, which comprise maybe a fifth of all EU laws.

And as for the border between Northern Ireland and the Irish Republic, in 2016 goods worth at most £2.4 billion, which was about 0.1% of UK GDP and about 9% of Northern Ireland GDP, crossed that border from north to south without any checks at all because it was presumed that they satisfied EU requirements; and in principle that could continue to be the case after we have left the EU, provided there was a new UK law to guarantee that all UK exports to the EU would continue to satisfy all EU requirements.

Makes no sense to make the rUK follow the EU. Only if we sell to them should we do so. What regulatory alignment to the EU means, is that our competitors get to set the rules for the UK irrespective whether we sell to them or not – TOTALLY UNACCEPTABLE !!!!

An Irishman called Nigel Farage on his show yesterday and told us that there is already smuggling across the ‘non-existent’ border between N and S. Diesel is cheaper in Eire and some things are cheaper in NI. Shoppers cross over the borders of Ireland and Switzerland, France and Germany to buy cheaper or non-EU regulated goods. Lorry driver bring their personal allowance of cheap and excellent Polish beer to the UK and presumably pass it on to friends living in the UK?
Presumably, M.Barnier is terrified that Irish citizens of the EU will be buying vacuum cleaners which are not half powered, as required by some clever Commissioner, and be able to do their vacuuming in half the time while using the same energy.

Items such as cars comply fully with EU standards and will have to after we leave, if ever. Why would manufacturers not adopt EU regulations for and EU market. They already have to manufacture cars for the US and Japanese regulations. All the paperwork is available to certify this already. Why are laws and regulations in the UK needed at all? Manufacturers have to put the CE or US stamp on their product already.

The Irish border issue is just part of the plot to delay and confuse, then reverse. Mandleson was at a conference with Barnier and an Irish ex PM. They are working behind the scenes. etc ed

The only point of the UK passing a new law to require UK exporters to the EU to continue to obey all relevant EU laws is to reassure the EU that it can continue to allow goods to cross the border from the UK into its territory without any more checks than are done now, thanks to existing UK law imposing that requirement among others. That is particularly important for the Irish border but it would also be helpful to apply it to cross-Channel exports. We do not do this with the US or Australia etc, we assume that those countries will do whatever checks they see fit when the goods enter their territory, but in this case the Irish and the EU are refusing to do any such checks. In fact the Irish have taken the absurd and extreme position of refusing to even acknowledge the existence of the border. If we make this very reasonable and generous proposal and it is rejected then the world will know who is to blame for disruption of the trade.

Ask them to forecast 15 weeks. It will be wrong. They have no idea what is going to happen, a good firing all round will set things right!
One thing we can predict for the experience of the last 30 years is that the EU as a percentage of global economic power will continue to decline sharply as it has done. Getting off a sinking ship always is a good idea.

The issue is not the accuracy of the forecasts as they cannot be accurate, at least three significant industries didn’t exist 15 years ago (smartphones, desktop 3D printing and crowdfunding) which the domain experts didn’t predict and the economists had no clue about.

As Duncan suggests above these forecasts are not intended to be accurate, they are intended like polls only to influence opinion in a particular way. The question is who and why.

“Early additive manufacturing equipment and materials were developed in the 1980s.[6] In 1981, Hideo Kodama of Nagoya Municipal Industrial Research Institute invented two additive methods for fabricating three-dimensional plastic models with photo-hardening thermoset polymer, where the UV exposure area is controlled by a mask pattern or a scanning fiber transmitter.[7][8]”

A lot depends on how the government handles our post-Leave economic policies. If Hammond continues to regard tax as an end in itself, and if the civil service persists in its resistance to implementing Brexit, we shall be hobbled from the get-go. An entirely new administrative mind-set is needed. We are still ruled by the Dickensian Ministry of Circumlocution, and it has grown beyond control.

Funnily enough, I can think of one organisation that has behaved in exactly that manner for the past few decades: the organisation in question is the Labour Party, and the member in question is Jeremy Corbyn, who has repeatedly voted against his peers ever since becoming an MP back in 1983. It would seem that in politics if you keep marching in the opposite direction long enough, the squad eventually turns round and falls in behind you.

Just as an aside, and as a direct consequence of the plethora of negative comments being lobbed at her from the direction of this blog, I thought I’d review for myself some of Anna Soubrey’s past interviews on YouTube the other day – and found myself deeply impressed by a) her sense of conviction regarding the righteousness of her cause as she perceives it, and b) her sheer bloody-minded determination to see it prevail. She’s someone I would want fighting on my side in the war – and I’ll therefore be following her career with interest as this particular one intensifies in the weeks and months to come.

Not even weather forecasters get it right even one hour ahead. On the basis of my town, the BBC , paid for my the tax-payer, with info from the Met Office,the Met Office itself paid by the tax-payer, has got weather wrong all day long hour by hour.This morning the BBC said it would not rain at any time. It did. The Met office said it would rain in the afternoon. It did not. According to both right now, this hour , complete with alleged satellite moving map it is tea-ing it down over my house . The sky is 65%” blue, not a rain cloud in sight. No rain or sleet or snow.

Our economic forecasters do not have the benefit of Hi-tech. Presumably they make a toad and spiderweb broth with an assortment of rodent tails and tip it into a teacup which I have nicknamed an Osborne Mug, swirl it round and come out with their verdict. We should ask them for a weather report.

Govt attempt to control outcomes, but it is Consumer Demand that dictates who buys what, & at what price. Each individual decides what he or she will or won’t prefer at the time of purchase. Forecasters cannot know what those millions of buyers individually will decide to do in their own unique future circumstances. Not even the individual person knows.

It is however predictable that if we regained our own fishing capability, we could have our Hake & eat it.

I’m trying to imagine what would be the response to John Redwood or Bill Cash calling for Anna Soubrey and her like minded friends to be ‘slung out of the party’ because they are ‘not Conservatives’. Why is the left always given a free pass?. The ‘nasty party’ thing was a myth but there is something ‘nasty’ about the left wing of the party.

Re the new Treasury forecasts on the impact of leaving the EU – it would be interesting to know what changes (if any) have been made to the modelling used in the previous Project Fear forecasts.

Professor David Blake of Cass Business School produced a paper in 2016 which provides a withering criticism of the methods used in the pre-referendum forecasts.

Some points to highlight from Professor Blake’s paper are:

1. For the short term, the Treasury assumed an immediate shock to the economy equal to 50% of the 2008-09 recession. This shock would persist for two years (unlike the v-shaped recovery from the recession), with no policy response from the government.

2. The longer term gravity model assumes that the EU remains the centre of gravity for UK trade – so that there is no outcome that is better than remaining in the EU. Professor Blake is critical of the Treasury for not preparing a model outcome using the “Rest of the World” as the centre of gravity for comparison.

He also points out that many other organisations including the IMF, OECD and BoE are using similar models so produce similar forecasts.

3. He is scathing about the way the Treasury produced the £4300 loss per household by 2030. GDP changes do not relate directly to household income so the number is meaningless. The Treasury also ignored the increased number of households by 2030.

Unless the Treasury publishes the assumptions and methodology for Project Fear Part II, then it should be given the same credibility as Part I. The Media should be demanding scrutiny of the entrails before presenting this latest report as fact.

About John Redwood

John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.